General Motors on the brink of collapse

A collapse of the long-troubled American auto industry would be a disaster, especially now, amid the turmoil besetting so many other sectors of the economy. But there is no easy way for the US government to prevent that without enabling the bad habits that brought the industry to the precipice. This is why, even after weeks of hand-wringing in Detroit and Washington over the excruciations of General Motors, no agreement has emerged to offer further help.

Given that millions of jobs and billions of dollars in tax revenues are at stake, Congress ought to be open to measures that would keep the automakers in business. But lawmakers should not bail out Detroit without imposing conditions that would make castor oil seem pleasant. The industry's problems were well known long before the current economic crisis began, and the goal of any rescue plan for GM should be to force the automaker onto a sustainable course.

Executives at GM have warned that, within several weeks, the company may run out of the cash it needs to pay for its own operations. Amid fears that no one will buy cars from a company at risk of failure, the government could consider shoring up the company's warranties, so that potential customers know they won't be left in the lurch.

GM would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh's projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up
Detroit-based GM, Ford Motor Co. and Chrysler LLC.